Little risk of rivals scuppering RWE-E.ON asset swap

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German energy companies RWE and Eon have reached an agreement that will see RWE acquire Eon's renewables business innogy.

The aim is for E.ON to focus on the retail, energy networks and customer solutions business, while RWE would take over the renewables power generation of both companies.

Under the deal, which has been agreed in principle, RWE will receive Eon's renewables business, plus Innogy's renewables and gas storage businesses. Further, RWE will receive the minority interests now held by E.ON's subsidiary PreussenElektra in the RWE-operated nuclear power plants Gundremmingen and Emsland.

While asset swaps had been discussed with other European companies, too, RWE never felt comfortable with taking on large exposure to southern Europe, the people said, citing ill-fated forays into the region by E.ON EONGn.DE during the last decade.

Germany's power companies are reshaping as they look to boost green energy output, shift away from fossil fuels and prepare for Germany's exit from nuclear power in 2022.

Dirty Focus       RWE's power generation capacity in Germany in MW as of end-2016              Source RWE sustainability report 2016
Dirty Focus RWE's power generation capacity in Germany in MW as of end-2016 Source RWE sustainability report 2016

Before striking a deal with E.ON, RWE held talks with European peers Enel and Engie and came close to a deal with Spain's Iberdrola before Christmas, people familiar with the matter said.

"It's good if there are competitive and internationally oriented energy providers in Germany", she said in a statement. One source said Australia's Macquarie MQG.AX had also been in the race.

Once the Eon-RWE deal, announced on Sunday (11 March), has gone through, Eon plans to integrate Innogy into its existing business. The supervisory boards of both RWE and E.ON have approved the transaction. Eon would transfer to RWE most of its renewables business and minority interests now held by Eon's subsidiary PreussenElektra in the RWE-operated nuclear power plants Emsland and Gundremmingen.

Today saw the publication of innogy's full-year results for 2017, reporting a 9% increase in net income to more than €1.2 billion.

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